The important principle:In any given time period, the value of output produced by an economy is equal to the total income that is generated in producing the output, which is equal to the expenditures made to purchase that output Value of output produced = total income generated = expenditure made to purchase

National Income Accounting
Formal definition for GDP:
The market value of all final goods and services produced within a country during a given time period
Expenditure Method:
C + I + G + (X-M) = GDP

Income Method:
Rent + Wages + Interest + Profit

Output Method:
Adding up the value of all final goods and services (to avoid double counting!)

Key Distinctions
Gross investment = net investment + depreciation

Nominal – value measured in terms of current pricesNominal GDP – measures the value of current output valued at current prices Real – value that takes into account changes in prices over time Real GDP – measures the value of current output valued at constant (base year) prices

Per capita – per person or per head

GDP – produced within the boundaries of a country
Ex. Toyota plant in US is part of US’s GDP
GNP – produced by the factors of production supplied by the residents of a country Ex. Toyota plant in US is part of Japan’s GNP

Why care?The enormous cumulative impact that rates of growth have on levels of real GDP and per capita explains why governments around the world focus strongly on factors and policies that will accelerate their rate of growth
Economic development – a process whereby increases in real per capita incomes are accompanied by improvements in levels of living of the population and reductions in poverty and inequalities
Timeline:
* 50s and 60s: focus on economic growth
* 70s: redistribution with growth
* 80s, 90s, and beyond: human development (the process of expanding human freedoms)
Relationship between the two:
* Economic growth can occur without economic development
* Some economic development can occur without economic growth but sustained development requires growth Limitations of GDP
GDP figures understate welfare because:
* GDP does not include non-marketed output * GDP does not include output sold in underground (informal) markets * GDP does not take into account quality improvements in goods and services * GDP does not take into account increased leisure

GDP figures overstate welfare because:
* GDP does not account for the value of negative externalities and undesirable by-products of production * GDP does not take into account the depletion of natural resources
GDP figures understate or overstate welfare because:
* GDP makes no distinctions regarding the composition of output * GDP provides no information on the distribution of income and output * GDP does not account for quality of life factors
* GDP and differing domestic price levels

Purchasing power parity – the amount of a country’s currency that is needed to buy the same quantity of local goods and services that...

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...The Warwick MBA
Assignment Cover Sheet
Submitted by: 1267499
Date Sent: 15 April 2013
Module Title: Economics For Business Environment
Module Code: EBE
Date/Year of Module: 2013
Submission Deadline: 17 April 2013
Word Count: 1180
Number of Pages: 8 (including this)
Question: Mid Module Assignment for EBE
“This is to certify that the work I am submitting is my own. All external references and sources are clearly acknowledged and identified within the contents. I am aware of the University of Warwick regulation concerning plagiarism and collusion.
No substantial part(s) of the work submitted here has also been submitted by me in other assessments for accredited courses of study, and I acknowledge that if this has been done an appropriate reduction in the mark I might otherwise have received will be made.”
Mid-module assessment
Please note that this mid-module assessment counts for 20% of your final EBE module mark.
1. Use the AS/AD framework to show the separate effects on GDP, inflation and public sector borrowing on any single national economy of:
a. a cut in the rate of corporation (profits) tax
b. an increase in the rate of VAT (sales tax)
c. a slowdown in the GDP growth of world trade.
Make sure that you include clear and appropriate diagrams for this question
2. Choose an economy. Analyse the main effects of a large cut in its government spending
Question 1 counts for 45 marks and question 2 counts...

...Part One - Analysis and Recommendations
Unemployment
When examining unemployment and supply and demand it is imperative to examine the affects one has on the other and vice versa. If no new jobs are created or layoffs occur, there are no jobs to supply the needs. As the availability of money lessens a smaller amount is available for the purchase of goods, therefore fewer goods are sold. As the demand lessens sales forecasts also become smaller, these forecasts project fewer orders placed to the manufacturers. Merchants do not want to hold onto a disproportionate amount of inventory, which can be extremely expensive, both from the standpoint of cash/credit expenditure and for the storage fees. The smaller the orders are for manufactured products will result in a smaller customer supply level (United States Unemployment Rate, 2013). It is essential to amplify government funding to generate new jobs in order for the unemployment rate to be reduced. From a Keynesian viewpoint increasing government, spending is a multifaceted benefit for everyone, and this will control the aggregate level. From a Classical perspective, it is best to let the economy naturally adjust, to incorporate the unemployment ratio. Consequently, for that reason, increased spending would not be fitting in this economic model.
Expectations
In the first three months of 2013, the GDP in the United States has...

...﻿
AggregateDemand and Supply Models
Desire Benge, Karen Bundrage, Deche Endsley & Amandeep Sharma
ECO 372
July 20th, 2015
Alan Beideck
AggregateDemand and Supply Models
The economy is a focus of every person living in America. Every business owner rather they are a small self-employed owner, or a stock holder part of a large worldwide organization is touched. They think about supply and demand, unemployment rates and inflation and how it is effecting their pocket books. One sure factor that policy makers take into consideration is the trends of the past. Using the trends of the past five years there are recommendations that our government needs to take head to in order to brighten our future, and hopefully they listen soon.
Unemployment
The economy is affected by many issues from wars to mass destruction, but one area hits harder than the rest; Unemployment. The "Bureau of Labor Statistics” (2015) website reflects that the country is on a downward trend of almost 4.5% decrease on the unemployment percentage in the past five years. Having such a large percentage drop in the past five years has allowed the American public to gain positions that will provide for their families.
The American public having earning an income flourish’s the economy and increased demand for privileged items. As the demand...

...definitions of aggregatedemand and aggregatesupply.
Answer: AGGREGATEDEMAND:
Aggregatedemand is the sum of all demand for final goods and services at a given time and price level.
AGGREGATESUPPLY:
Aggregatesupply is the sum of all final goods and services that will be supplied at a given time and price level.
Question Number 2: Why does short run aggregatesupply curve slope upward?
Answer: Because profits rise when the prices of the goods and services rise, and firms sell more rapidly than the prices they pay for inputs.
Question Number 3: What are the causes of a shift of aggregatedemand curve to the right?
Answer: A shift of aggregatedemand curve to the right may be caused by any of the following:
1. An increase in the money supply will increase demand directly as people and firms will have more money to spend and indirectly by lowering the rate of interest.
2. A rise in optimism will increase both consumption and investment.
3. A fall in the exchange rate will be likely to increase demand for net exports.
4. Government policy resulting in a reduction in taxes and/or an increase in government expenditure will raise...

...AggregateDemand and Supply Models Economic Critique
Ken Drake,
ECO 372 Macroeconomics
September 10, 2012
Jason Foster
AggregateDemand and Supply Models Economic Critique
In the United States the economy is currently in a recession, although signs are indicating that the economy is slowly recovering. In an effort to analyze the Unites States economy the unemployment rate, expectations, consumer income, and interest rates have been evaluated. The results of these evaluations are included in this report.
Unemployment in the United States fell to 8.1% from 8.3% in July. U.S. employers are said to have added 96,000 jobs in July (KSL News, Sept) . According to reports from the department of workforce services the decrease in the unemployment rate was not because of new jobs but rather from people not looking for work. In order for a person to be counted as part of the unemployment rate they must actively be seeking work. The unemployment rate does not give an accurate rate of all people out of work.
Interest rates in the United States vary depending on what is being assessed. Home mortgage rates are as low as 2.26% in some areas. The Federal Reserve stated in August that they were going to further steps to stimulate growth if the job market does not show sustained improvement (U.S. Federal Reserves leaves monetary policy unchanged, August). Interest rates are...

...AggregateSupply and Demand
Francis F Perkins
ECO/372
April 10, 2013
Ed Mendicino
AggregateSupply and DemandAggregatedemand is the total demand for goods and services in the economy at any given time and price level. It is the quantity of goods and services in the economy are now and in the future purchased at possible price levels. This is thedemand for gross domestic products (GDP) of a nation when supply levels are fixed. The aggregatedemand is a downward slope on a model because at lower price levels a greater amount is wanted.
Aggregatesupply is the total supply of goods and services that business is in an economy plan on selling in an exact time. It is the total amount of goods and services, companies are willing to sell at a specified price level in an economy (Sexton, 2005).
The high unemployment that the United States is experiencing reflects an underperformance of aggregatedemand. Despite three-quarters of growth, the real GDP is 6 % below its trend path. Unemployment is high because the economy is producing below its ability. Long-term unemployment is at record levels is a sign the high unemployment rate is the result of fundamental issues. Now 6.5 million workers have been out of...

...economy.
* The world oil price rises sharply.
* U.S. businesses expect future profits to fall.
a. Explain for each event whether it changes short-run aggregatesupply, long-run aggregatesupply, aggregatedemand, or some combination of them.
A deep recession in the world economy decreases aggregatedemand. A sharp rise in oil prices decreases short-runaggregatesupply. The expectation of lower future profits decreases investment and decreases aggregatedemand.
b. Explain the separate effects of each event on U.S. real GDP and the price level, starting from a position of long-run equilibrium.
A deep recession in the world economy decreases aggregatedemand, which decreases real GDP and lowers the price level. A sharp rise in oil prices decreases short-run aggregatesupply, which decreases real GDP and raises the price level. The expectation of lower future profits decreases investment and decreases aggregatedemand, which decreases real GDP and lowers the price level.
c. Explain the combined effects of these events on U.S. real GDP and the price level, starting from a position of long-run equilibrium.
The combined effect of a deep recession in the world economy, a sharp rise in oil prices, and the...

...whether it changes the short-run aggregatesupply, long-run aggregatesupply, or a combination of the two, and why.
a) Automotive firms in the United States switch to a new technology that raises productivity.
Technological change enables firms to produce more from any given amount of facts of production. Therefore, technology increases potential GDP. So, an increase in potential GDP increases both- long runaggregatesupply and short- run aggregatesupply.
b)Toyota and Honda build additional plants in the United States.
Toyota and Honda build more plants in the United States; it is an increase the quantity of capital. So it will increase potential GDP. Increasing both- long run aggregatesupply and short- run aggregatesupply.
c)The price of auto parts imported from China rise.
When the price rise change the quantity of real GDP supplied, which does a movement along the short-run aggregatesupply curve illustrate. The short-run aggregatesupply will increase; but it does not change aggregatesupply.
d) Autoworkers agree to a cut in the nominal wage rate.
A decrease in the nominal wage rate increase short-run aggregatesupply; it does not change the long-run...